The Commerce Department reported that new home sales in December dropped to the lowest level in nearly 13 years.

Instead of the million or two we're used to hearing reported at year's end, new home builders only sold about 774,000 new homes in 2007. That's 26.4 percent below 2006, and the biggest year-over-year drop since 1963, when new home sales were first tracked by the government.

Prices fell dramatically in December for both the average (-11.5 percent to $267,300) and the median (10.9 percent to $219,000) price fell 10.9 the biggest drop in prices since 1970. The median is the point at which half the sales are under and half the sales are over.

Completed homes were 40 percent of the inventory on hand, which is a 26-year-high in relation to the pace of sales. There is now a 9.6 month supply of homes for sale at the December sales pace.

The National Association of Realtors had recently reported the first year in decades that the median sales price fell.

New homes costing more than $400,000 fell 50 percent from a year earlier, illustrating that the credit crunch isn't over yet for jumbo loans. And sales financed by conventional loans fell 27 percent. Home sales with VA or FHA loans fell 16 percent. Homes purchased with cash fell 24 percent.

But as bad as all that sounds, things could turn around.

Clearly buyers are waiting for prices to come down, but since December, mortgage interest rates have softened a full percentage point to near record lows. Consumers can save approximately $100 a month in payments, and qualify for homes that might have been out of reach a month ago.

The government is feverishly working on solutions that will raise the conventional loan limit from $417,000 to $625,000 which would allow more people to finance without resorting to exotic loans.

In addition, new home standing inventory has caused existing home sales to soften. If more inventory is absorbed in new homes, that improves the outlook for existing homes.

Look for a much better late winter and early spring. Home sale trends are identified over several months.

Published: January 29, 2008

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.